Real Vision: Finance & Investing Adventures in Finance 38 - Black Monday: First Hand Accounts of the 87 Crash
Oct 20, 2017
Join legendary market figures Art Cashin, Director of Floor Operations at the NYSE, who shares gripping behind-the-scenes stories from the 1987 crash, alongside trading expert Greg Weldon, who offers insights from his fresh trading experience, and Bill Fleckenstein, who discusses the pitfalls of portfolio insurance. They dive deep into the turbulent emotions and psychological factors that fueled investor panic. Personal anecdotes elevate this reflection on Black Monday, making it a captivating exploration of market dynamics and lessons learned.
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1987 Crash Origins
- The Plaza Accord of 1985 significantly weakened the dollar, stoking inflation and fueling a stock market rally.
- This rally, combined with rising bond yields and energy prices, created an overheated market susceptible to a crash.
Pomboy's Premonition
- Richard Pomboy, a tech investor, grew increasingly nervous about market volatility in the months leading up to Black Monday.
- He developed a plan with Goldman Sachs to exit his positions quickly if necessary.
Portfolio Insurance and Complacency
- Portfolio insurance, a popular hedging strategy in 1987, contributed to market complacency.
- Investors believed they could avoid losses, but the strategy's reliance on selling futures created systemic risk.